Binance, Nigeria and the trouble worldwide

Binance is widely regarded as the largest cryptocurrency platform globally, facilitating billions of dollars in transactions daily. It has over 179 million registered users as of March 3, 2024, spread across over 100 countries supporting over 30 languages.

Despite its prominence, this emerging financial institution operates with relatively lax oversight from financial regulatory agencies, unlike traditional financial institutions. This lack of stringent policing renders the platform vulnerable to illicit transactions.

However, it also plays a significant role in fostering economic growth and providing earning opportunities for both digital natives and digital immigrants. Established in 2017, Binance rapidly gained widespread acceptance, particularly among digital natives, spreading rapidly like wildfire.

Binance has encountered significant resistance from governments worldwide, citing concerns over its lack of transparency and regulatory issues. Numerous countries have opted to completely ban Binance from their cyberspace, prohibiting transactions within their borders. Among the countries that have implemented such bans are China, Malaysia, Italy, Vietnam, the Philippines, Thailand, Australia, and several others.

Despite facing stringent sanctions in the financial arena, Binance is boldly embracing the wave of AI to stay competitive in the cryptocurrency market. The company has incorporated AI token known as “Sleepless AI,” into its platform which is available on the Binance Launch pool. A visit to the Binance website indicates a listing of top AI crypto tokens according to market capitalization with a market cap of over $7 billion and over $1.3 billion trading volumes.

Despite being banned from Japan, in 2022, Binance made determined efforts to re-enter the Japanese crypto market by expressing interest in acquiring Sakura, a Japanese crypto company. In another development, Binance sought a crypto license in Germany to facilitate transactions within the country’s crypto market, aiming to expand its presence across Europe. However, the crypto giant encountered regulatory hurdles from German financial regulators. In a prompt response, in March 2023, Binance announced the withdrawal of its license application.

Following sanctions imposed on Iran, sidelining the country from traditional financial systems, Iran turned to Binance as an alternative gateway to financial institutions. Blockchain data reveals that between 2018 and 2022, Binance facilitated over $8 billion worth of transactions for Iranian firms.

Banning Binance from a country does not necessarily prevent Binance customers from finding alternative means to conduct transactions within the banned country’s crypto market. The Wall Street Journal published on  August 2, 2023, that despite being banned from China, Binance successfully facilitated over $90 billion in transactions in one month within China’s crypto market.

In the current digital age, blocking access to Binance is unlikely to be effective. Users can easily bypass restrictions by installing a Virtual Private Network (VPN) with a fleet of thousands of servers across many countries, choosing a server in a country where Binance operates, and accessing the platform with minimal effort.

In 2021, Binance encountered regulatory challenges in Thailand, with the country’s financial authorities accusing the platform of operating without a license. This led to the filing of a criminal complaint against Binance with the Thai police. Later, Binance was finally banned from operations in Thailand.

The cryptocurrency platform found itself entangled in a legal dispute with US authorities, facing accusations of violating federal money laundering laws by neglecting to report more than 100,000 transactions deemed suspicious. Prosecutors argued that Binance serves as a prime environment for ransomware transactions (a cyberattack method that denies victims access to their computers until a specified ransom is paid via payment systems) and the exchange of payments for child abuse materials.

In what appears to be an effort to resolve the matter out of court, Binance has opted for a plea bargain with US authorities. Under the terms of this agreement, Binance agreed to pay a substantial fine of over $4.3 billion ($1.81 billion for criminal acts and forfeiture of $2.52 billion). Additionally, Binance pleaded guilty to sponsoring terrorism and involvement in money laundering. As part of the agreement, Binance has committed to operating within the legal framework and implementing monitoring mechanisms, as reported by Reuters on February 24, 2024.

On June 10, 2013, NPR Business News reported that the US Securities and Exchange Commission and Commodity Futures Trading Commission filed a lawsuit against Binance in court. The lawsuit was based on the absence of regulatory oversight, highlighting Binance’s operation without stringent policing akin to traditional financial institutions, inflating volumes of trades artificially and diversion of funds belonging to customers.

Currently, Binance is engaged in a contentious dispute with the Nigerian government, which has resulted in the government blocking access to the platform. Binance was reportedly fined a substantial sum of $10 billion by the government, though the circumstances surrounding the fine are enveloped in controversy. Users can circumvent the block by utilising a VPN as previously discussed.

Therefore, rather than the Nigerian government potentially losing billions in revenue through the backdoor, it would be more prudent to legalise and regulate the platform. Given that Binance handles transactions in billions of dollars, I argue that it would be unwise to discard the benefits along with the drawbacks (“throwing a baby with the bath water”). Particularly in light of the high levels of unemployment among youths and the prevailing hardships in the country, many young people have discovered opportunities in the world of Binance.

Therefore, rather than outright banning Binance from Nigeria, integrating it into the country’s legal framework may yield better outcomes. As a short-term solution, Binance should be permitted to continue its operations in Nigeria under stringent control mechanisms established within the country’s legal framework, with critical oversight from entities such as the Central Bank of Nigeria (CBN), Economic and Financial Crimes Commission (EFCC), and other relevant authorities.

For a long-term strategy, the CBN and EFCC, in collaboration with the Cybersecurity Department of the Federal University of Technology, Minna, should undertake high-impact research to be sponsored by the CBN and EFCC to develop a robust framework for regulating cryptocurrency operations in Nigeria. This framework should aim to strike a balance between Nigeria’s legal system and economic growth objectives.

Emphasising research and development is a globally recognised best practice for addressing societal challenges, as opposed to relying solely on inter-ministerial committees, which may lack the necessary technical expertise, resources and research skills. 

Chiroma, PhD. Artificial Intelligence, University of Hafr Al Batin, Saudi Arabia, [email protected]